Planting the Seeds of PV Merchant Projects

Mexico’s long-term electricity auctions have attracted so much competition that prices have been pushed to rock bottom levels, which is positive for the country’s energy consumers. But the increasingly thin profit margins stemming from the aggressive package prices means merchant projects are driven to multiply, says Albert Rojas, CEO and Co-Founder of Centurion Solar. “A PV generation project is sold by its bottom line: profit margins,” he says. “There is a lot of money to be made in generation and sale of kWh in Mexico.” PV module costs are coming down, as are prices for PV system components. Installation costs are on the low side, while electricity rates are on an upward trend.
Centurion Solar is among the leading PV installers on the US East Coast. It enjoys an active partnership with PV heavyweights SunPower and NRG. “SunPower manufactures one of the best solar panels in the world, on a retail and commercial basis. We act as a PV installation partner,” he says. In NRG’s case, Centurion is an O&M partner, overseeing 27,000 PV installations and completing EPC work for over 4,000 installations so far.
Rojas says the decision to install only, rather than offering design and sale, is key to Centurion’s success. “It is impossible to do all three at the same time and be a great company,” he says. “Many companies in the US started that way. But by trying to do everything in-house, they created chaos for their businesses.”
The company encountered a rough patch of its own while trying to set up shop in Mexico in 2013, as the country’s nascent PV industry stumbled on financing difficulties. “We knocked on the door of many AAA companies,” Rojas says. “While initially enthusiastic about the idea of switching to solar, the initial push turned into lukewarm support when cost estimations came in.”
In 2017, Centurion Solar decided to adapt and refocus its approach. The PV EPC company replicated what it learned from the US model in terms of financing. “We reinforced our business strategy with a rethought method, establishing relationships with different finance companies in Mexico,” Rojas says. “We are promoting the use of lease vehicles and other financing options that made commercial PV projects what they are now in the US.”
Equity investors are the primary target of Centurion Solar’s plans, considering it wants to focus solely on merchant PV parks outside of the long-term electricity auctions. “We created a financial model for utility-scale solar parks. We are in talks with different investment entities to showcase our model and the expertise behind it,” he says. Permits, engineering, installation, O&M, are all integrated into this model, Rojas says.
While he remains confident that commercial banking will eventually rise to the occasion and capitalize on PV business opportunities, these institutions are still hesitant to finance merchant projects. Bureaucratic procedures also remain a hurdle for companies looking for their financing. But Rojas says the model is starting to show results, as Centurion Solar won a bid for the EPC and O&M contracts for a 175MW solar park in Puebla. “Funding is already flowing,” he says. “It is a great success for Centurion Solar as one of the largest projects it has undertaken since its inception.”
The company’s goal is to build up the quality of Mexico’s PV installations. “Through Centurion Solar’s NABCEPcertified team of engineers, our priority is to transfer the US National Electricity Code standards to Mexico’s PV generation,” Rojas says. He believes the company’s multiple affiliations are a testament to its continuous quest for quality and durability. “Our US affiliations are mainly prerequisites to obtain the necessary certifications and licenses to install PV systems,” he says. “The number of affiliations increased in parallel to our growth.”
In addition to putting the finishing touches on its 175MW PV park with a secured investment of US$220 million, Centurion Solar is developing a pipeline of PV projects in Mexico, covering the 5-30MW range of installed capacity.